Elektrim's future hangs on shareholder meeting
By : Roseanne Gerin
French telecom and environmental conglomerate Vivendi Universal, which holds about 10% of Elektrim's freely floated shares and a 49% stake in the Polish concern's telecom unit, Elektrim Telekomunikacja (ET), needs the support of a group of minority shareholders to gain control of Elektrim's supervisory board and sack its current management. The outcome of the vote hinges on a group of key minority financial investors, the largest of which include Franklin Templeton Investments, Merging Markets Development, Chemia Polska, Schroeders, PZU Group, Flemings Funds, Interelektra Holding, DWS Investment, Baring Eastern Europe Fund and Baring Emerging Europe Fund.
Ultimately at stake is the ability of a new supervisory board to establish a management team to wipe out Elektrim's crushing debt, which at the end of last year included liabilities totaling more than zl. 3.8 billion ($950 million), and to outline a course for the company's financial stability. Elektrim has E440 million worth of convertible bonds due in December as well as a collection of short-term debt and commercial paper. Shareholders are eager to secure a board that will put Elektrim back on track and pay all its outstanding debts, according to analysts.
The GSM will also be the cumulation of a three-way battle between Elektrim, Vivendi and Deutsche Telekom (DT). The two foreign companies have both sought control of Elektrim's telecom assets, especially Polska Telefonia Cyfrowa (PTC), Poland's largest mobile firm that operates under the Era brand name and is estimated to be worth about $6 billion.
DT controls 45% of PTC. ET, the joint telecom holding of Elektrim and Vivendi, controls the remaining 51%.
Vivendi has been outspoken about its plans to gain control of Elektrim's supervisory board and to swap shares of ET to merge the unit back into the parent company, thereby increasing the French concern's stake in Elektrim to over 60%, according to news reports. Alain Delrieu, Vivendi's spokesman, did not return a phone message.
"There is no other option (for shareholders) than to cooperate with Vivendi because it is the only entity that has plans to solve the problems of Elektrim," said Wlodzimierz Giller, a telecoms and IT analyst at Erste Securities Polska.
But DT, despite its stake in PTC, has remained silent in the matter. Elektrim previously stated that its board intended to transfer all its telecom assets to PTC, giving the Germans control of the firm, and then float the shares on the Warsaw Stock Exchange (WSE).
But Giller said this scenario was unlikely to happen. "Shareholders are interested in resolving the problem of Elektrim's huge debt, and floating one of Elektrim's assets PTC won't solve it," he said.
Iwona Jarzebska, Elektrim's director of communications, refused to comment on the company's plans before the shareholders meeting, but added that it was looking at various strategies for its future development. She said she could not comment on previous reports that Elektrim would transfer all its telecom assets to PTC and float the shares on the bourse. Hans Ehnert, DT's spokesman, was not available for comment.
The clashes between Elektrim, Vivendi and DT started last December when Elektrim signed a letter of intent to sell DT majority stakes in six telecom and data transmission companies for $180 million. Elektrim also mulled plans to sell the Germans control of PTC.
Vivendi opposed the deal. The French company saw it as a breach of its 1999 agreement with Elektrim, when it saved the almost-bankrupt Polish firm with a $1.2 billion cash injection. In February, Vivendi filed an arbitration case against Elektrim to block the sale, but a Polish court later rejected Vivendi's request for an injunction to stop the deal.
Vivendi then used its position on Elektrim's board to schedule a vote, hoping to oust Elektrim's controversial chief executive officer Barbara Lundberg and vice president Jacek Walczykowski. As a countermove, three of Elektrim's supervisory board members resigned, thus preventing the remaining members to take any further action without a quorum.
Pro-Vivendi shareholders called for a GSM on April 20 to vote on changes in Elektrim's supervisory board. In early April, however, the GSM's date was moved ahead to May 14 after a group of investors opposed to Vivendi's plans requested a delay.
